The Most Delinquent Loan of Them All: Student Debt
College Insurrection routinely reports on the enormous debt burden now being carried by young Americans, and how that is likely to adversely impact our country’s economic future.
My Budget 360 has graphically analyzed the data from various sources, showing that “people are going into too much debt to finance their educational pursuits.” (Hat-tip, Glenn Reynolds).
With that as our backdrop, half of college graduates are not utilizing their increasingly more expensive degrees:
What is even more troubling is that the underemployment rate for recent college graduates has trended up in the last few years while the overall unemployment rate has fallen:
No, we are not looking at a chart of Spain or Greece but a chart of US recent graduates. A large part of the decline in the unemployment rate has come because the civilian employment population ratio continues to lower:
While many older Americans have dropped off the radar, many recent graduates simply do not have this option. Many over the last few years have clearly opted to take on jobs that are under-utilizing their degrees….
Student debt before the 2000s hit was typically a safe financial bet. Delinquencies on student debt reflected this. Today, we now find ourselves at the precipice of another bubble with student debt having the highest delinquency of any form of household debt:
You can see this rate doubling only in the last few years.
My Budget 360 offers a troubling conclusion:
The rising delinquency rates are simply the last straw in the student debt bubble. This is a bubble. When you have prices soaring without any underlying economic change, you have a big problem on hand. Keep in mind that what you can afford and the price of something are fully disengaged since the government will lend pretty much whatever is necessary to go to school. If the cap was $100,000 a year, you can rest assured you will have some for-profits cropping up with $100,000 a year degrees. Record delinquencies and half of recent graduates working in jobs where a massively expensive degree is not being used does not bode well for higher ed at the moment. No one has a crystal ball on how this will play out but you can rest assured that something is going to give. You don’t need a college degree to figure that one out.
The most delinquent loan of them all: Student debt delinquencies at record levels on the eve of rates doubling. (My Budget 360)
Comments
I find the notion that college graduates can in general be underemployed simply by virtue of their college education conceptually and operationally problematic. I can see it in a limited way where the degree is in an area where the education has a very direct link to a set of jobs such as nursing, computer science, engineering, accounting or law, but how does it work for Liberal Arts degrees? In what way are college ball players who fail to get a job on a pro team “underemployed”?
The first concern in any discussion of the student loan “crisis” has to be avoidance of the transfer of this mess onto the backs of the taxpayers, many of whom never attended college. I keep seeing headlines like “Student Loan Debt – the Next Collapsing Bubble?”, followed by the most shallow treatment of the issue. This is a zero sum game for the most part, because the vast majority of student loan debt is federally guaranteed. The borrower pays or the taxpayer pays. It’s that simple.
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